2. ๏ฝ Credit rating is essentially , the symbolic
indicator of the current opinion of the rating
agency on the relative ability and willingness
of the issuer of a financial (debt) instrument
to meet the service obligation as and when
they arise.
๏ฝ It provides a relative ranking of credit quality
of debt/financial instrument or their grading
according to investment qualities.
3. ๏ฝ A credit rating is a measure used by creditors to
determine how much they can trust a certain
borrower, whether the borrower is an individual, a
corporation, or a country. The credit rating is derived
using past financial data or the borrowerโs credit
history.
๏ฝ Factors that affect credit rating:-
1. The ability to pay a loan.
2. The amount of credit in existence
3. Credit history
๏ฝ A poor credit rating indicates a high risk of defaulting
on a loan, and thus leads to high interest rates(S&P
D-grade).
4. ๏ฝ Rating is nothing but estimated worth or
value in terms of symbolic grade given to a
personโs or organizationโs ability to pay back
the loans raised , with the help of individual
or organisation.
๏ฝ As per SEBI regulations, credit rating is
nothing but an opinion regarding securities
expressed in the form of standard symbol or
in any other standarised form assigned by
Credit Rating agency.
5. ๏ฝ With offices in 23 countries and a history that
dates back more than 150 years, Standard &
Poorโs is known to investors worldwide as a
leader of financial- market intelligence.
๏ฝ Today Standard & Poorโs strives to provide
investors who want to make better informed
investment decisions with market intelligence in
the form of credit ratings, indices, investment
research and risk evaluations and solutions.
Most notably, we are known as an independent
provider of credit ratings. In 2010 S&P issued
162,418 new and 556,872 revised ratings.
6. ๏ฝ Depend on rating agency. Ex.- (S&P)
๏ฝ โAAAโโExtremely strong capacity to meet financial commitments. Highest
Rating.
โAAโโVery strong capacity to meet financial commitments.
โAโโStrong capacity to meet financial commitments, but somewhat susceptible
to adverse economic conditions and changes in circumstances.
โBBBโโAdequate capacity to meet financial commitments, but more
subject to adverse economic conditions.
โBBB-โโConsidered lowest investment grade by market participants.
โBB+โโConsidered highest speculative grade by market participants.
โBBโโLess vulnerable in the near-term but faces major ongoing uncertainties
to adverse business, financial and economic conditions.
โBโโMore vulnerable to adverse business, financial and economic conditions but
currently has the capacity to meet financial commitments.
โCCCโโCurrently vulnerable and dependent on favorable business, financial and
economic conditions to meet financial commitments.
โCCโโCurrently highly vulnerable.
โCโโCurrently highly vulnerable obligations and other defined
circumstances.
โDโโPayment default on financial commitment
10. โข Validation of โCompany
Country โข Political
Positionโ
โข Economic
โข Trends Risk
โข Industry โ Specific factors
โข Quality of Earnings
โข Foreign exchange
& Analytical adjustments
โข Peer Group Comparisons
Profitability Industry
/ Peer Group Business Factors
Comparisons
Risk
โข Industry Trends
โข Industry Structure
โข Market Size
โข Competitive Factors
โข Growth Potential
โข Market position
โข Cyclicality
โข Keys to Success
Company โข Bases of Competition
โข Size
Position โข Changing Technology
โข Diversification
โข Operating Risk
โข Management
โข Regulatory Environment
11. โข Operating sources & uses
Of liquidity โข Accounting Regime
โข Other potential calls on Accounting โข Reporting & Disclosure
Liquidity โข Analytical adjustments
โข Debt Characteristics โข Inventory valuation and
โข Bank credit facilities
Liquidity / Governance
Short-term Financial Risk
Factors Risk
โข Ownership
โข Board of directors
โข Working capital need
โข Management practices
โข Analytical distinctions with
โข Financial Strategy
profitability Cash Flow โข Risk Tolerance
โข Cash flow measures Adequacy โข Accounting Practices
โข Stability of cash flow
โข Internal controls
12. ๏ฝ Source of additional certification
๏ฝ Lower cost of borrowing.
๏ฝ Increase the investors population.
๏ฝ Rating as marketing tool.
๏ฝ Self discipline by the companies.
๏ฝ Reduction of cost in public issues.
๏ฝ Motivation for growth
๏ฝ Foreign collaborations made easy
13. ๏ฝ Safeguard against bankruptcy.
๏ฝ Low cost information
๏ฝ Recognition of risk.
๏ฝ Creditability of issuer.
๏ฝ Quick investment decisions.
๏ฝ No need to depend on investment advisors
and professionals.
๏ฝ Choice of investments.
๏ฝ Benefits of rating surveillance
14. ๏ฝ Specificity.
๏ฝ โก Relativity.โก
๏ฝ Guidance.โก
๏ฝ Not a Recommendation.โก
๏ฝ Broad Parameters.โก
๏ฝ No Guarantee.โก
15. ๏ฝ CRISIL :- Credit rating information services of
India limited.
๏ฝ Fitch Ratings India Private Ltd.
๏ฝ ICRA Limited
๏ฝ Credit Analysis & Research Ltd. (CARE)
๏ฝ Brickwork Ratings India Private Limited
๏ฝ SME Rating Agency of India Ltd. (SMERA)
16. ๏ฝ CRISIL is India's leading Ratings, Research, Risk
and
Policy Advisory Company. CRISIL, the first credit
agency was set up in January 1987.โก It was
started jointly by ICICI & UTI with an equity
capital of Rs-4 cr. Each of them holds 18% of the
capital.โก
๏ฝ Other contributions to the capital are as follows.
Asian Development bank 15%
LIC, GIC & SBI 5% each
HDFC 6.2%
Banks (Indian) 19.25%
Banks (Foreign) 13.55%
17. ๏ฝ CRISIL Ratings is India's largest rating agency,
having rated more than 24,541 debt instruments,
of more than USD 655 billion (Rs.30,71,459 cr.),
issued by over 7938 companies.โก CRISIL
has strong 60% penetration in the domestic bond
market and a 53% market share in the bank loan
rating segment.โก CRISIL Ratings rates virtually
every kind of organization, including industrial
companies, banks ,SMEs, non-banking financial
institutions, insurance providers, mutual funds,
infrastructure entities, state governments, and
urban local bodies. It also rates securitized
paper.